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Lack of demand hits home builders
By Alan Zibel |
July 21, 2010, Wednesday
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Print Edition
Print Edition
HOME construction plunged last month to the lowest level in the United States since October as the economy remained weak and demand for housing plummeted.
Construction of new homes and apartments in June fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the US Commerce Department said yesterday. May's figure was revised downward to 578,000.
Driving the June decline was a more than 20 percent drop in the volatile condominium and apartment market. Construction of single-family homes, the biggest part of the market, dropped 0.7 percent.
One bright area of the report was an increase in building permit applications, a sign of future activity. They rose 2.1 percent from a month earlier to an annual rate of 586,000.
Still, the slumping job market and competition from foreclosed properties have forced builders to limit construction, especially after tax credits expired in April.
"The housing market remains the Achilles' heel of the recovery," said Miles Leahey, a senior economist at Decision Economics. "It is hard to imagine confidence recovering to healthy levels until the housing market experiences much less distress."
Builders may be turning their attention away from new projects to complete those already in progress. Housing completions rose 26.2 percent in June, noted John Ryding and Conrad DeQuadros, economists at RDQ Economics.
"Our best guess is that housing construction activity continues to bottom out at low levels and that we will see some very modest growth in the second half of the year in new housing construction," they said in a note to clients.
The National Association of Home Builders said on Monday that its monthly reading of builders' sentiment about the housing market sank to 14 - the lowest level since March 2009. Readings below 50 indicate negative sentiment about the market.
Each new home built creates, on average, the equivalent of three jobs for a year and generates about US$90,000 in taxes paid to local and federal authorities, the association said. The rate of home building is still up about 15 percent from the bottom in April 2009, though down 76 percent from the last decade's peak in January 2006.
Construction of new homes and apartments in June fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the US Commerce Department said yesterday. May's figure was revised downward to 578,000.
Driving the June decline was a more than 20 percent drop in the volatile condominium and apartment market. Construction of single-family homes, the biggest part of the market, dropped 0.7 percent.
One bright area of the report was an increase in building permit applications, a sign of future activity. They rose 2.1 percent from a month earlier to an annual rate of 586,000.
Still, the slumping job market and competition from foreclosed properties have forced builders to limit construction, especially after tax credits expired in April.
"The housing market remains the Achilles' heel of the recovery," said Miles Leahey, a senior economist at Decision Economics. "It is hard to imagine confidence recovering to healthy levels until the housing market experiences much less distress."
Builders may be turning their attention away from new projects to complete those already in progress. Housing completions rose 26.2 percent in June, noted John Ryding and Conrad DeQuadros, economists at RDQ Economics.
"Our best guess is that housing construction activity continues to bottom out at low levels and that we will see some very modest growth in the second half of the year in new housing construction," they said in a note to clients.
The National Association of Home Builders said on Monday that its monthly reading of builders' sentiment about the housing market sank to 14 - the lowest level since March 2009. Readings below 50 indicate negative sentiment about the market.
Each new home built creates, on average, the equivalent of three jobs for a year and generates about US$90,000 in taxes paid to local and federal authorities, the association said. The rate of home building is still up about 15 percent from the bottom in April 2009, though down 76 percent from the last decade's peak in January 2006.
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